For the past 15 months, the price of oil has dipped to prices that have led to a major rethink by governments in the Gulf on what their economies might look like if they were no longer dependent on energy commodities. The government of the UAE has strategic plans in place to actively pursue diversification, and the continued prosperity through this period of readjustment to lower prices shows that this policy is well thought out, is practical and delivers economic results independent of and uninfluenced by the floating price of oil.
In international trading over the past few days, oil has climbed to the significant watermark price of $50 (Dh183.5) per barrel. Trading now has seen it float just below that price point.
With energy commodities, it’s important not to look at a day’s close — for that can be influenced by so many factors, be their geopolitical, production-related, or simply where traders sell to collect profits on hedged prices — but study instead the trend.
Clearly, since the beginning of April, oil has been climbing steadily, moving from the $40 mark to that of a gradual trending increase to the recent $50 watermark. And you don’t need a degree in economics to see that oil is rebounding, and that the general trend is upwards.
This increase in oil also reflects a general sentiment in the US — still the world’s largest economy — that the overall pattern is one of expansion and growth. The US Federal Reserve is of the view that things are going well enough for the economy that it should be able to sustain a modest increase in the Fed rate in the coming months. And after taking somewhat of a beating these past weeks, the dollar is once again rising against all other main currencies, even though that is a mitigating factor on the price of oil, which becomes more expensive.
On Thursday, members of Organisation of Petroleum Exporting Countries (Opec) will meet in Vienna. While some energy and oil traders are hoping that this meeting might agree on production cuts, that’s a sentiment that’s not widely shared.
If there was a time for Opec to consider cuts, it would have been at the beginning of this year, when oil was at $27. Since then, there has been no need for production cuts or quotas, and market demand and appetite ruled. Nothing has changed since then, and oil has risen. The trend is up, so why interfere now?
